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Trading Week 4/2/13

There has been a fair bit of positive data out in the last 24 hrs but there has been a reluctance to embarce this and run with much, or any, ‘risk on’. The USDX continues to edge higher with the EURX moving lower:

US stocks jumped with the initial good trade balance data report but have failed to move on from there….as yet:

Whereas, the E/U has moved with more ‘risk off’. The current TS signal on this pair, the only TS signal, is up 50 pips:

Even many of the 30 min charts were choppy. The G/U did give a good 30 min trade during the London /US session though. This was counter trend though:

Friday 8th (7 pm)

The second batch of Chinese data was below expectation. So, ‘any potential ‘risk on’ bias seems to have stalled for the time being at least. In fact, the EURX looks to be under some pressure:

The signal on the E/U is still valid but price has barely moved since this morning. I have noted before how, when there is Ichimoku Cloud divergence on the indices, then trades are better found off the 30 min charts during the US session. I’ll check this pair in the morning to see if that holds true again:

There has been some positive data out of China but the gloomy Euro comments from ECB Draghi might weigh on sentiment still. The indices are chopping sideways and probably waiting for some direction from Europe or US:

There is still divergence across the charts so I’m expecting it to be choppy.

There is more Chinese data due out at 4.30 pm too.

Friday 8th (9.30 am)We seem to be in a bit of a ‘risk off’ move. I have had a TS signal to short the E/U on my 5am candle close. I would be waiting to see a close below the weekly 200 EMA first though. I’m away so will probably now wait until next week anyway. Also, I don’t have any other signals and we have some divergence making me cautious:

Friday 8th (5 am….yep…that’s right…5!)

Some mixed US data and concerns over Europe have sent the market back into ‘risk off’. The continued talk of a need for some pull back seems to have become a self fulfilling prophecy. My charts were pointing to this as Ichimoku Cloud divergence on the indices crept in during the week. This now seems to be gathering pace.

The USDX has shot up and through the weekly 200 EMA to reach the daily 200 EMA:

The EURX has fallen to test support of the previous S/R level of 108.5

The USD weekly chart is still supporting the possible H&S pattern. I have mentioned before that the right hand shoulder could chop around for at least another month before completing this pattern. I also stressed that a pullback up to the 81.70 would not be too surprising as well as this would maintain symmetry, if nothing else!

The current print of the S&P500 weekly is still supporting a possible continuation pattern. The previous rally was about 2 months. The current rally has been 2 month now too so, a pause may be in order. It will be interesting to see if the 1,500 level can hold out until the end of the trading week:

Talking about patterns, the E/J seems to have conformed to a previous pattern that kept me out of a LONG trade this week:

The EU summit continues so that might keep markets jittery.

We could get a few weeks of ‘risk off’ trading and I will be looking to the Cloud charts for indications of this. I will be waiting to see what the next major momentum move is and, then, trading in line with that, long or short. Until then, the usual pattern will probably return. That is; choppy 4 hr markets with better opportunity off 30 min charts during the US session. This pattern has already shown itself overnight with a perfect example of this on the E/U. A great 30 min chart trade on the E/U was evident from the start of the US session with a possible 150 pip move:

I wouldn’t go out swimming when the sign says ‘dangerous rip’ so I won’t be 4hr trading when my Ichimoku Cloud charts are pointing to divergence and choppy markets.

Thursday 7th (9 pm)

The weekly and 4hr 200 EMA proved to be a bit too strong resistance for the USDX. Price has bounced back down from this level:

The USDX is still above the Cloud on the 4hr chart though so I’ll still be cautious until there is complete alignment for ‘risk on’ again…if it does indeed return!

I’m keeping an eye on Silver and Gold too. They are both edging closer to the edge of their ‘handle’ patterns:

The S&P500 MAY be setting up for a good intra day SPY trade BUT I’d want to see the start of the US market open first and, also, some outcome from the ECB:

Thursday 7th (2.30 pm)

There seems to be a bit more of a push towards ‘risk off’ at the moment. The USDX is pushing up over the resistance levels of the weekly and 4hr 200 EMAs:

The weekly chart is worth a bit of analysis here. The right hand shoulder of the H&S pattern could, theoretically, take another month to form up fully. Also, in the interest of symmetry, it seems entirely possible that the USDX could retrace back up to the 81.70 level. This would add balance to the left hand side of this pattern.

The current print of the weekly candle on the S&P500 weekly chart is suggesting that a retrace could be on the way. I have discussed this chart already and how the 2 month trend between June and September has been reflected since November:

Patterns do seem to be repeating themselves.I noted yesterday my concern with the possible repeat pattern on the E/J. My concern was indeed valid!

Most pairs are just chopping about sideways now. I suspect that, like me, many are waiting until after the ECB news.

I am waiting until after the ECB news release before trading so as to get a better idea on what the next market momentum move will be. Long, short…I don’t care. I’ll trade with momentum.

Thursday 7th (8 am)

The USDX seems to have parked itself under the weekly 200 and 4hr EMAs and just near the monthly pivot. I suspect it is waiting for Super Mario.:

I am watching the Ichimoku charts with keen interest though. The USDX 4hr chart is still trading above the Cloud in a ‘risk off’ alignment.

The USDX daily chart seems to be heading into the Cloud…choppiness ahead then!

Price is still well below the EURX daily Cloud though:

Look at the EURX 4hr chart though…..any negative Euro comments out of the ECB could flip this action to ‘risk off’ as well.

I’m keeping a VERY OPEN mind here. I would not be surprised to see more of a pullback here before any further ‘risk on’. I posted a chart last night of the S&P500 weekly chart. I noted that we are now two months into this bull run. This was the same length of time for the last bull run.The print today suggests that the pattern I discussed could well evolve!

Thursday 7th (6 am)

The indices have just chopped around sideways as have most pairs. The Yen pairs have pulled back a bit suggesting a bit of yen strength.

The E/U seems to have parked itself at the 1.35 area.

Stocks were choppy too

There is AUD red flag data out later BUT I still think everyone is waiting for the ECB comments.

I’m driving interstate later and will be out for much of the day. I’m waiting to trade until after the ECB release anyway.

Wednesday 6th (8 pm)

Ok, so I’m wondering why everything is so choppy at the moment….and then I looked at the indices charts. Some Ichimoku Cloud divergence has reared it’s head again. Price is above the Cloud on the EURX daily and 4hr chart BUT price is also above the Cloud on the USDX 4hr chart and embedded in the Cloud on the USDX daily chart. Time for caution for sure:

Something else to note…on the S&P500 weekly chart…

The pattern seems to continue. There were two bullish months between the bear trend channels of April/June and Sept/Nov. Well, we have now had two bullish months for Dec and Jan since the last bear channel. So, if the pattern is to continue…will we see a bit of a pullback? That, is what I call the $62 question!

Wednesday 6th (7.10 pm)

I feel quite comfortable now being cautious with these moves….

Wednesday 6th (5 pm)

No new signals.

I actually think I’m going to wait until after the ECB Press Conference. I’m sure I’m not the only one and that might be why there is so little momentum moving things at the moment. That is, unless I see more signals, other than just Yen ones, start to kick in together.

Wednesday 6th (1 pm)

Current E/J, A/J and U/J signals are limping along.

No new signals just yet. A short trying to form on the A/U. A long trying to form on the EUR/AUD but, interestingly, they have not formed up fully jut yet even with the moves from today’s Asian session.

Wednesday 6th (11.15 am)

E/J: I’m being careful with the E/J. Check out the 4hr chart below. I’m concerned that a previous pattern might repeat itself. I have shaded the previous and current period with two pink ellipse shapes.

Note the first ellipse: price tested 120, didn’t break then retreated for a while. (See the first arrow…LHS). Price then re-tested 120, broke through but didn’t hold. (see second arrow from LHS). Price then retreated quite a bit, only to break 120 again much later.

Look at what we’ve just had: a test of 127 and no break and then a retreat. ( Second ellipse…first arrow from LHS). Price has now broken this 127 level BUT..will it hold or will it retreat like last time…only to break later? Who knows BUT I’m being careful. It is currently just under 127 as I type.

Wednesday 6th (9.05 am)

I’ve had weak signals to LONG the E/J, A/J and U/J after my 9 am candle. I’d be wary of the A/J though given there is red flag data out later today:

E/J

A/J

U/J

Wednesday 6th (6.30 am)

The indices are still looking like they want more ‘risk on’:

Thus, I thought I’d see lots of new signals having kicked in overnight. WRONG…and that is a bit of a flashing warning light to me. The only signal trying to form up is on the A/J and it will take my 9am candle close to confirm. There is AUD data out later today and tomorrow so Id be careful with any Aussie based trades.

The Kiwi is trying to look bullish too BUT it is a public holiday in NZ today so that may slow it down a bit:

SPY Trade: It was another great session for possible SPY intra day trades during the US session. A TS signal came when the S&P500 was at 1,499:

I would have looked to buy the Feb SPY $149 Call. This opened the session at $1.79 and is currently trading at $2.85. That is an increase of $1.06. The SPY Call would most likely have been higher than that when the trade would have been placed so this is a very rough estimate of profit:

The maximum ROIC would then be = (1.06/1.79) x 100 = 59%. Again, not bad for one trading session!

Overall: I don’t think I’m the only trader wary of comments from ECB Draghi and the the possible impact that these may have on the Euro. So, momentum may not kick in until after that news release.

Tuesday 5th (9.30 pm)

The counter trend signals have closed off with this reversal. They were always risky, being on the 4hr time frame and in an overall ‘risk on’ environment, which is why I left them. I’m seeing trend line breaks out of the channels I had in place but no new TS signals. They will take a bit of time to form up after a sharp reversal like we’ve started to see. That’s if it follows through!

Tuesday 5th (8.30 pm)

I was thinking there might have been a bit more of a pullback. Maybe not! I had expected more hesitation leading up to the ECB news on Thursday. Oh..well. I’ll keep an eye out for new TS signals:

Tuesday 5th (6.50 pm)

Some new trend channels to keep an eye on:

E/U

E/J

A/J

E/A

U/J: History keeps repeating itself here!

Tuesday 5th (6.40 pm)

I mentioned in an earlier post that the USDX might pullback to its weekly 200 EMA and the EURX to the 108.5 level. They have both done that now so, it will be interesting to see if they turn back from here or continue with a bit more ‘risk off’:

Tuesday 5th (5.50 pm)

My 5 pm candle gave a TS short on the E/J as well. I’m just watching these though:

The counter trend E/U signal is up 70 pips! The E/A is pretty flat though:

No other signals for now.

Note: The USDX pull back means that we could head back to having Ichimoku Cloud divergence. I’ll keep an eye on this:

Tuesday 5th (2.20 pm)

E/U thoughts: I’m waiting for AUD data at 2.30 pm but was just mulling over the E/U. The monthly chart below is rather clean and you can see how there have been 6 bullish months so far. I think it could be quite possible for a pullback to extend at least half way down the previous January candle. That would be a pullback to the weekly 200 EMA. Hmmm…..a nice confluence there!

Tuesday 5th (1 pm)

The EURX is stalling as it approaches the 108.5 level:

The USDX is approaching the monthly pivot so may stall a bit too:

The two TS signals are still going for now. I didn’t take them but I’d have stop to entry ASAP here. Especially for the E/A with AUD interest rate data out in an hour or so:

E/U

E/A

Tuesday 5th (9.20 am)

The EUR/AUD has given a new TS short signal now too. That makes the E/A and the E/U with new signals. I’m not taking these given the Cloud charts are aligned for ‘risk on’. I have had ANOTHER ‘Epiphany’ moment here though with the Cloud charts. More writing ahead for me today!

Tuesday 5th (8 am)

There was a great SPY ETF trade off the 30 min S&P500 charts during the US session last night. The risk off’ mood was always likely to continue through the US session, especially given the recent highs that had been achieved. It was not surprising to see the markets take a breather! The S&P500 gave a TS SHORT signal when the S&P500 was at 1,502:

I would have looked to buy the Feb $150 Put. This Put opened @ $0.82 cents and finished at time of this processing @ $1.46. That is an increase of $0.64cents

The ROIC for this trade is ROIC= (0.64/0.82) x 100 = 78%. That is a great return for just one day!

Tuesday 5th (6.50 am)Whoa… a great SPY trade opportunity last night on the S&P500…I’ll crunch the numbers later when I get back from the beach

Tuesday 5th (6 am)

The pullback seems to be forming up nicely. I was hoping to see the USDX pull back to the weekly 200 EMA and the EURX to the 108.5 level or lower and this might just eventuate!

All TS signals have closed off now which is great…for me. This will allow new TS signals to form up on the next momentum move. It is hard to know just how far the individual pairs will pullback to. That is why I will wait for new signals rather than just pick a lower level and hope that is the turning point.

I got a new TS signal to SHORT the E/U on my 5am candle:

A signal is trying to form on the EUR/AUD too.

BTW: The VIX is up which is great as it will mean more premium for Put selling over coming days.

We are seeing pullbacks on the E/U and EUR/AUD. I won’t simply target pullback values to place orders to jump in LONG again on these pairs. I will wait for new momentum based TS signals. I miss part of the start of all moves but that’s how my system works.

Muscovici’s concerns getting quite a bit of an airing this morningWritten by Eamonn Sheridan February 4, 2013 at 08:58 GMT Muscovici’s weekend comment is getting quite a bit of air on dealing desks this morning.He said, in a TV interview, that the Euro was ‘possibly too high’.

Still some retracement evident. The USDX is approaching the previously broken trend line and weekly pivot. This may test it a bit.

The EURX might get support from the weekly pivot.

EUR/AUD: this signal has closed off….yeah.

The E/U looks to be closing off too but it’s not 100 % clear just yet.

Kiwi: The Kiwi is stuck at the upper trend line of a major triangle break

Cable: getting support from the monthly trend line still

Yen weakness keeps the other open signals going for the time being:’

E/J

A/J

U/J

I’m going to be patient and disciplined and wait for new TS signals.

Monday 4th (1 pm)

Woo hoo…we might be getting a bit of a pull back after all!

I’m watching and waiting.

BTW: I had warned of comments about a too high Euro possibly spooking ‘risk on’. Forex Live reported this just now:

From a few hours ago – Euro possibly too high: Moscovici

Written by Eamonn Sheridan February 4, 2013 at 01:01 GMT

This comment from French Finance Minister Muscovici was made in a television interview over the weekend. Something to be aware of.

Monday 4th (9.15 am)

The markets still seem to be moving with ‘risk on’ bias. Yen weakness seems to continue as well. Remember, the Cloud charts are aligned for continued ‘risk on’ BUT I’m wary of a possible pause or pullback given the looming road blocks on the index charts. I’d actually love a pause, or pullback, to enable new TS signals to form up so that I could enter new trades! The trend may just keep continuing though too.

My index charts aren’t open yet but the currencies look this way so far:

E/U

E/J: watch out for the monthly 200 EMA just up ahead of current levels: